NAFTA talks face new challenges amid US’s change in negotiation strategy

Monday, 2018-08-20 17:09:17
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US President Donald Trump (L) and Canadian PM Justin Trudeau meet on the sidelines of the 2018 G7 Summit in Charlevoix, Quebec, Canada last June. (Photo: New York Times)
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NDO – The process of negotiations to update the North American Free Trade Agreement (NAFTA), according to insiders, are roughly two-thirds complete. However, while the tripartite negotiation objectives remained unchanged, it seems that the United States is changing its negotiating tactics, manifested through the “freezing” of Canada in the NAFTA negotiations.

NAFTA negotiations have seen unusual changes over the past four weeks, with Mexico and the US resuming talks in Washington without Canada. Accordingly, US Trade Representative Robert Lighthizer and Mexican Economic Minister Idelfonso Guajardo held bilateral talks to remove important barriers, such as the rules of origin for automobiles, which will automatically expire after 5 years as proposed by the US, the settlement mechanisms for trade disputes, market access and investment.

After four weeks of talks, Guajardo informed the media that Mexico’s negotiating team had achieved progress in its deal with the US on new regulations for the automobile industry. However, the two sides have not yet made any decisions on the issues that existed before Canada entered the negotiating round and did not announce the details of the recently reached US-Mexico bilateral agreement. Prior to that, the US proposed that 40% of the content of an automobile must be produced in areas that pay higher salaries (over US$16 per hour), such as those of the US and Canada, however, the Mexican side only accepted a rate of 20%.

The US and Mexico conducting negotiations over the NAFTA, a tripartite deal (the US, Canada and Mexico), without Ottawa’s involvement has sparked many rumours and concerns about Canada’s interests. Explaining this, officials of the three countries said that the US has chosen to carry out “bilateral” talks for temporary practical reasons and this move is definitely not a way to send a message to Canada. In addition, the negotiation process also sets the fact that there is a need for some bilateral negotiations on certain thorny issues. As for the Canadian side, their officials also stated that they were not surprised as the US and Mexico held separate discussions to address several bilateral issues, such as the difference in the automotive issue. The spokesman for the Canadian foreign minister told reporters that Canada’s NAFTA negotiating team still maintain regular contact with their US and Mexican counterparts to protect the country’s interests during negotiations and move towards a modernised and updated NAFTA. Earlier, Canadian Foreign Minister Chrystia Freeland and her Mexican counterpart Luis Videgaray, together with Mexican Economic Minister Guajardo, had agreed to defend a tripartite NAFTA, which includes the US.

However, the reality shows that the questions on Washington’s “tearing apart” of its two NAFTA partners to make more beneficial negotiations for the US are not quite irrational. During a cabinet meeting broadcast on TV on the first anniversary of the NAFTA renewal negotiations, US President Donald Trump acknowledged that the US has “frozen” NAFTA talks with Canada and said it would not negotiate with Canada at present. President Trump also complained about Ottawa’s tariff policy, saying that “Their tariffs are too high; their barriers are too strong. So we’re not even talking to them right now.” Meanwhile, in his speech at the meeting, US Trade Representative Robert Lighthizer did not conceal the US’s intention to use the results of its talks with Mexico to pressure Canada. He affirmed that the NAFTA talks between the US and Mexico are expected to gain breakthroughs in the coming days and that after the US and Mexico reach an agreement, Canada will follow the deal.

The process of renegotiating the NAFTA began in August 2017 at the request of US President Trump, following his announcement that Washington would withdraw from the agreement if the benefits to the US were not met. The member countries are now optimistic about achieving a new NAFTA. The US officials have set a target of reaching an agreement no later than the end of August so that the countries’ parliaments will be able to approve the renewed NAFTA before Mexico’s president-elect, Andres Manuel Lopez Obrador, assumes office on December 1. If the NAFTA talks are completed in line with the aforementioned deadline, this agreement will be ratified by the current US Congress and will avoid protests from the Democrats in case the Republicans lose control of the Congress in November’s mid-term elections. However, analysts are worried that if the US implements its strategy of “freezing out” Canada in the NAFTA negotiations, this could put the NAFTA talks in confrontation with new risks and challenges, if the US move makes Ottawa angry.